Selling commercial property in Texas: what the seller owes the title company before closing

What the seller owes the title company

A commercial seller in Texas owes the title company five things before closing: proof of who owns the property and who may sign for that owner, a payoff letter for every lien, the existing survey and owner's policy if the seller has them, the lease, rent and deposit records that drive the prorations, and the facts needed for tax reporting (FIRPTA status and the Form 1099-S information). The deed, assignments and bill of sale are prepared and signed against that file.

Sellers who send these items when the title order opens give the title company time to find problems while the contract's objection and cure period is still running. Sellers who wait for the closing package tend to find a missing release, an unsigned consent or a deposit mismatch in the last week. This guide walks through each deliverable, who usually provides it, and what the title company does with it.

Start with ownership and authority to sign

The title company needs to establish both the owner of the property and the authority of the person signing for that owner. Those are separate questions. A company may hold title, while an individual signs the deed and closing instructions on its behalf.

For an entity seller, the commonly requested package includes the certificate of formation, company agreement, applicable consents, and incumbency information. Together, these documents help explain the entity's structure, the approval for the transaction, and the identity and capacity of its authorized signer.

Provide the operative documents, including relevant amendments. A formation document alone may not answer whether a manager, member, officer, or another representative has authority to approve and execute the sale. Likewise, a signature block in the contract does not replace the supporting authority documents.

Use this practical division of work:

An entity chart can help explain a layered ownership structure, but it should accompany the underlying documents rather than substitute for them. Give the title company a clear path from the property-owning entity to the individual expected to sign.

Our guide to entity documents a commercial closing needs provides a focused place to organize that part of the file.

If an authority document is missing, identify the gap directly. Do not wait until the signing package arrives to discover that the proposed signer's authority still needs support.

Give the title company a complete lien and property file

For every lien affecting the property, provide the information needed to obtain and review a payoff letter. The seller's expected loan balance is useful for planning, but it is not a substitute for the lienholder's payoff instructions.

A payoff letter tells the closing team what the lienholder requires to receive payment. The title company must connect that obligation with the correct property, borrower, lien, and proposed disbursement.

Identify every known lien, including obligations beyond the principal property loan. If the seller knows about an issue that may affect title, explain it when the file opens. A closing team cannot organize a complete payoff and cure process around information it has not received.

The seller's property file should also include:

• An existing survey, if available.
• The existing owner policy, if available.
• Payoff letters for every lien.
• Information about known title issues and documents relevant to resolving them.
• The contract's requirements for title review, objections, and cure.

An existing survey or policy is a starting document for review. Providing it does not, by itself, establish that it satisfies the current transaction's requirements. Ask the title company to identify what the file still needs after reviewing the available materials.

Keep title review tied to the contract. A seller's obligation to address an objection depends on the transaction documents and the issue raised. Distinguish an item that has been identified from an item the seller has agreed to cure, and distinguish both from a completed cure.

Our resources on title objections and cure periods and problem title and curative work can help frame those discussions.

For each unresolved item, maintain a clear record of the requested document or action, the responsible party, and its status. That gives the broker, owner, counsel, and title company a shared view of what remains open without treating an expected resolution as an accomplished one.

Reconcile leases, deposits, and property transfers

For an income-producing property, the title company needs financial and transfer information as well as ownership documents. A clean title file does not establish which rents have been collected, how much tenant money the seller holds, or which operating contracts the buyer will assume.

Start with the rent roll and security deposit information. Make the relationship between tenants, rent collections, and deposits clear enough to support the closing adjustments. If records conflict, resolve the difference before asking the closing team to incorporate the figures into the settlement statement.

The commonly required transaction documents include assignments of leases and contracts and a bill of sale. Tenant estoppels are also seller deliverables when the contract requires them.

These items serve different purposes:

Do not treat the rent roll as a substitute for every supporting record. It may summarize the tenants while leaving unanswered questions about collections or deposits. Similarly, delivering a tenant estoppel does not replace the assignment of the lease.

The seller, broker, and transaction counsel should identify which transfer documents need preparation and which require the seller's signature. Giving the title company a list of expected documents helps it coordinate the package; it does not make the title company the source of the underlying business terms.

For land or another property without tenants, say so when organizing the file. The useful task is to identify which deliverables apply to the actual sale, rather than circulate a tenant checklist with unexplained blanks.

Review taxes, prorations, and seller reporting

The seller must give the closing team enough information to allocate property income and expenses and complete applicable reporting. This work affects the seller's proceeds even when the purchase price remains unchanged.

Texas tax certificates are addressed by Tax Code 31.08. Property taxes for the year are prorated at closing. The seller should provide available tax information and review the tax adjustment shown in the closing figures.

Other common prorations include rents collected and operating expenses. Security deposits are credited to the buyer. Those entries should agree with the supporting property records and the transaction's agreed allocation.

Review the adjustments by category:

• Taxes: Check that the property and tax information correspond to the asset being sold.
• Rents collected: Reconcile the rent information with the seller's collection records.
• Operating expenses: Identify the expenses being allocated and the supporting records.
• Security deposits: Confirm that the buyer's credit agrees with the deposit schedule.

The settlement statement should express the agreed allocation. It should not be the first place the parties discover that their underlying records differ.

Seller status also matters for federal withholding. Under FIRPTA, when the seller is a foreign person, the buyer generally must withhold 15% of the amount realized and remit it to the IRS. A non-foreign seller signs a certification of non-foreign status.

Identify the seller's status during preparation so the closing team can address the applicable documentation. Do not assume that a Texas property address or an entity's involvement answers the seller-status question. If the classification is unresolved, flag it for the seller's tax adviser and the closing team rather than completing a certification by assumption.

The settlement agent generally reports the gross proceeds of a real estate sale to the IRS on Form 1099-S. Provide the seller information requested for that reporting and check it against the ownership information in the transaction.

Gross proceeds reporting, lien payoffs, and net cash to the seller are different parts of the closing accounting. Review each for its own purpose instead of expecting the reported sale proceeds to match the final wire amount.

Compare closing costs and follow the money

In Texas, title premiums are promulgated by TDI under Texas Insurance Code 2703.151. The same title premium applies at every title company. Escrow fees vary.

That makes the comparison straightforward: evaluate the escrow fees, the allocation of charges under the contract, and the company's ability to handle the transaction's commercial requirements. Do not select a title company on the expectation that it can discount the promulgated premium.

The seller commonly pays for the owner policy in Texas, but the contract decides who pays in a commercial transaction. Read that provision before estimating seller proceeds.

A useful seller proceeds review starts with the sale price, then traces each deduction, credit, payoff, and proration to a source. An unexplained difference deserves a question before the seller approves the figures.

Funding is a separate requirement. Texas Rule P-27 prohibits a title company from disbursing until good funds for the transaction have been received and deposited. Wires are the norm.

Signed documents alone do not authorize disbursement without good funds. When discussing the expected release of proceeds, distinguish document signing from receipt and deposit of transaction funds.

If proceeds involve multiple parties, give the escrow team clear, agreed instructions and identify the relevant participants. Our discussion of commercial escrow with multiple parties addresses that coordination. A broker's estimate of who receives what should be reconciled with the final closing instructions and settlement figures.

Organize the closing package around decisions still open

A seller can deliver many documents and still have an incomplete closing package. The better test is whether the documents answer the transaction's remaining questions.

Organize the file around ownership, liens, property operations, transfer documents, reporting, and funding. Within each category, separate items already supplied from items awaiting preparation, review, approval, or signature.

The deed belongs in that process. It is a core seller deliverable, but the seller does not need to arrive with every document already drafted. Identify who will prepare it, how the seller will review it, and who will sign in the established capacity.

Apply the same approach to assignments and the bill of sale. Confirm that the documents reflect the assets and interests the contract requires the seller to transfer. Avoid relying on a document title alone as evidence that the agreed transfer is covered.

If the transaction involves an exchange, raise it while the closing arrangements are being organized. The escrow team needs to coordinate the closing with the exchange structure and instructions. Aurum provides commercial escrow and 1031 closings, and our guide to 1031 exchange closings in Texas offers a focused starting point.

The broker can help maintain the deliverable list and identify unresolved business terms. The owner supplies the property and entity information, approves the transaction documents, and confirms the accuracy of seller records. Counsel and tax advisers address the matters within their respective roles. The title company coordinates its title and escrow requirements with that work.

For scheduling discussions, our resource on how long a commercial closing takes provides context. The seller's actionable task is to identify dependencies: a missing payoff, unsupported signing authority, unreconciled deposits, or unfinished transfer documents.

Before approving the final package, check that:

• The seller's identity and signer's capacity agree across the documents.
• Every lien being paid appears in the payoff and settlement review.
• Lease, deposit, and proration figures match the supporting records.
• Required transfer documents and certifications are ready for signature.
• The settlement figures reflect the contract's allocation of costs.

How Aurum Title handles the seller's side

Aurum Title Inc. (TDI license 2752531) provides commercial title and escrow in Dallas for multifamily, self-storage, industrial, land and builder lot sales, with policies underwritten by Chicago Title, Fidelity National Title and Westcor. The owner's policy premium is set by the state, so a seller is really choosing the people who will work the file.

Three of our four owners are attorneys, including our executive escrow officer, Austin Pennington, and two managing partners of Atwood & McCall, PLLC. On a sale, that matters most where sellers get stuck: an old lien with no release, a signer whose authority runs through two layers of entities, or a cure item the contract obligates the seller to fix. Our founder and CEO, Brian Gramlich, has more than 15 years in commercial real estate finance, and our process is systemized, so every seller file is worked from the same list of deliverables and open items stay visible to the broker and counsel.

If you are listing or have a sale under contract, open a title order with the contract, the entity documents and any known payoff or title issue, and an escrow officer will tell you what the file still needs.

Frequently asked questions